China's independent refineries in Shandong province received more imported condensate as feedstock amid recovering gasoline demand, but the trend is unlikely to continue as prices of the raw material is rising, trading and refining sources told S&P Global Platts June 16.
Condensate is usually a rare feedstock for the small-scale independent refineries in Shandong because most of these refineries are configured to crack medium to heavy oil to produce gasoil.
"Demand for condensate emerged in the sector as gasoline sales are improving, " a trading source said.
Trade flow tracker Kpler showed that the Greece-flagged Athinea has discharged 42,000 mt of North West Shelf condensate from Australia at Shandong's Longkou port on June 10. This was likely one of the two condensate cargoes chartered by Glencore for independent refineries, sources with knowledge of the matter said.
Prior to this, several condensate cargoes had arrived at Shandong in May, local trading and refining sources said, adding that Vitol and Mercuria were also actively trading condensate cargoes for the sector.
The gasoline sales by this group of Shandong's independent refineries jumped 30.4% year on year in May to 3.28 million mt, also rising 8.8% from April, data from local information provider JLC showed.
Trading sources said most of the condensate barrels end up at some tiny independent refineries, which have no quota to crack imported crudes.
These tiny refineries have splitters, which are able to process condensate to produce naphtha as a gasoline blending material for sale. These refineries, each with the ability to consume 30,000-50,000 mt of feedstock per month, usually buy import quotas to bring in the condensate barrels, refining sources said.
"There are some inquiries for condensate, but the premiums have gone up, dampening their interest to close deals," another trading source said.
S&P Global Platts data showed that FOB NW Shelf has rebounded to $34.50/b on June 15 from the record low of $7.04/b on April 22, which is the lowest that Platts has assessed FOB NW Shelf since the assessment was launched on October 2, 1995.
This suggests that NW Shelf arrivals are likely to slow in late July and August, industry sources said.
